Activist Campaigns At Financial Companies Soar

The number of companies in the financial sector targeted by activists worldwide grew by 50% from 2014 to 2015, and interest remains high going into 2016. Indeed, 40% of the US companies subjected to activist demands in 2016 are classed as financial stocks.

According to data collected by research firm Activist Insight, 108 financial companies were subjected to public demands by activists last year, up from 72 in both 2014 and 2013. The number of companies subjected to public demands in 2010-2012 were 40, 44 and 59 consecutively.

The banking industry has been the most frequently targeted, reflecting the prevalence of a number of specialized funds which operate in the space, including PL Capital, Stilwell Value, Lawrence Seidman and Clover Partners. Closed-end funds, a speciality of Bulldog Investors and Karpus Investment Management, are not far behind.

Activist campaigns in REITs

In the past few years, activists have paid even greater attention to real estate investment trusts (REITs), and a real estate focused activist, Land and Buildings, ranked seventh in the Activist Top Ten, a feature in the Activist Investing Annual Review 2016.

Financial companies publicly subjected to activist demands

2010

2011

2012

2013

2014

2015

2016

Other

17

16

26

22

19

31

7

Banks

5

15

17

27

29

27

4

Closed-End Funds

11

9

7

7

4

13

3

Investment Brokerage

1

3

1

2

3

10

1

REIT

4

1

5

12

16

20

5

Insurance

2

0

3

2

1

7

1

Grand Total

40

44

59

72

72

108

21

Activist campaigns in financial companies

The growth of activist investing in the US market has seen that country overtake most other markets, particularly when it comes to financial stocks. Last year, 69% of financial companies targeted by activist investors were based in the US, and all but two in 2016 (the exceptions were Grainger, a UK-listed real estate developer, and Bank of East Asia, which Elliott Management is pushing to sell itself).

2010

2011

2012

2013

2014

2015

2016

Proportion of targeted financial companies with US HQ

50%

61%

53%

69%

65%

69%

90%

This week, activist investor Carl Icahn is expected to announce a rival slate ahead of AIG’s annual shareholder meeting. Recent years have seen little activity in the insurance sector, but Sandell Asset Management likely scored a big win pushing reinsurer PartnerRE to halt a takeover by Axis Capital and instead sell itself to Exor.

Josh Black, spokesman for Activist Insight, said in a statement “Previously, it was thought that the more closely regulated the industry, the less appealing for activists. While many of the restrictions that previously applied continue to exist, activists will be emboldened by their success in other fields and a period of more intense competition between financial companies to try and take advantage of growing value differentials.”